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“When the U.S. government wishes to spend more money than it receives as tax revenue, it covers the shortfall by borrowing, and foreign lenders have become increasingly important sources of such borrowed funds. Reliance on foreign lenders is as old as …
READ MOREA policy of low interest rates is a textbook response of monetary authorities to the economic weakness brought on by deficient aggregate demand. The policy is justified by pointing to various ways in which money can promote economic activity—including …
READ MORE“A clear and credible path of fiscal consolidation is clearly needed and would do much to remove uncertainty about future policy and thereby build confidence. The reason why such a plan is not being articulated and carried out now is an apparent concer …
READ MOREOn Wednesday, August 4, Secretary of Treasury Timothy Geithner debated the Bush tax cuts with Douglas Hotz-Eakin, president of the American Action Forum. It was not much of a debate. With Geithner and Holtz-Eakin joined by the third panelist, John Pode …
READ MORE“The only way fiscal and monetary stimulus could “work” is if the flow of real savings (i.e., real funding) is large enough to support (i.e., fund) government activities and activities that sprang up on the back of loose-monetary policy while still per …
READ MORE“In a recent Wall Street Journal column, Princeton economist Alan Blinder wonders why 64 percent of Americans do not believe the $849 billion “fiscal stimulus” bill “saved or created” many jobs. “The main reason,” he explains, “appears to be that the W …
READ MORE“In a recent article in this journal, Giffin, Macomber, and Berry (1981), hereafter referred to as GMB, attempt to test the hypothesis that larger deficits cause increases in the money supply and hence inflation. To test the debt monetization hypothesi …
READ MORE“The sharp rise in the rate of inflation in 1973, after two years of diminishing rates, was a great surprise to many. What was the primary cause? Many rea-sons have been advanced to explain this change, some of them logical, and some not. Most of the e …
READ MORE“In his presidential address to the American Economic Association (AEA), Milton Friedman (1968) warned not to expect too much from monetary policy. In particular, Friedman argued that monetary policy could not permanently influence the levels of real o …
READ MOREAccording to Reinhart and Rogoff, “for the advanced economies during 1800-2008, the picture that emerges is one of serial banking crises.” In This Time is Different, the authors bring us up to the present by examining the history of banking crises. Ban …
READ MORE“The financial crisis, the speculative bubble leading up to it, and the aftermath have proven once again just how true the old saying is that if you want to know what’s going on in the financial system, watch the banks. The banking system has always be …
READ MORE“In 1998, four renegade German professors tried to stop the introduction of the euro with a legal challenge in Germany’s highest court. Now, 12 years later, they are fighting against a German bailout for Greece — and this time around, people are liste …
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